2018 (6) TMI 1060 - AT - Insolvency and Bankruptcy

Duty of insolvency resolution professional - corporate insolvency process - Held that - Duty of insolvency resolution professional is to take over assets that may or may not be in possession of the Corporate Debtor. We accept the submission made above, that does not mean the insolvency resolution professional can remove the tenant though it is open to him to take over the possession of the assets of the Corporate Debtor. If the tenant is not paying the rent, it is also open to the insolvency resolution professional to move before the appropriate forum/court of law. Appeal dismissed.

Summary

Issues:
1. Interpretation of Section 14 of the Insolvency and Bankruptcy Code, 2016 regarding the moratorium on property recovery.
2. Authority of the Resolution Professional to seek direction for rent payment and asset protection from tenants.
3. Duty of the Resolution Professional to take over assets under Section 18 of the Insolvency and Bankruptcy Code, 2016.
4. Applicability of the insolvency resolution professional to remove a tenant and recover rent.

Analysis:

1. The primary issue in this case revolves around the interpretation of Section 14 of the Insolvency and Bankruptcy Code, 2016, which imposes a moratorium on property recovery by an owner or lessor when the property is occupied by the corporate debtor. The Adjudicating Authority highlighted that the Resolution Professional (RP) cannot invoke Section 14(1)(d) of the IB Code to seek direction for rent payment from tenants without the approval of the Committee of Creditors (COC). The RP was advised to approach the District Administration under regulation 30 of the Insolvency and Bankruptcy (Insolvency Resolution) Regulations, 2016 if facing difficulties in discharging duties as per Section 25 of the IB Code.

2. Another issue raised was the authority of the RP to seek directions for rent payment and asset protection from tenants. The Tribunal clarified that while the RP can recover rent from tenants, seeking directions without COC approval is not permissible under Section 14 of the IB Code. The RP was advised to approach the District Administration for necessary actions. The judgment emphasized that the RP cannot remove a tenant but can take over possession of assets and resort to legal action if the tenant defaults on rent payment.

3. Regarding the duty of the insolvency resolution professional to take over assets under Section 18 of the Insolvency and Bankruptcy Code, 2016, the Tribunal acknowledged the RP's responsibility to manage and protect the assets of the Corporate Debtor. However, the judgment clarified that this duty does not extend to removing tenants, but rather to taking possession of assets and pursuing legal remedies in case of non-payment of rent by tenants.

4. The Tribunal dismissed the appeal, concluding that there was no infirmity in the impugned order. It was reiterated that the RP's role is to manage assets and debts of the Corporate Debtor, including rent recovery from tenants, but seeking specific directions without COC approval and attempting to remove tenants directly are not within the RP's purview. The appeal was dismissed with no order as to costs, indicating that the impugned order was upheld without any modifications.

Overall, the judgment underscores the limitations and responsibilities of the Resolution Professional under the Insolvency and Bankruptcy Code, emphasizing the need for adherence to legal procedures and COC approval when seeking specific directions or actions related to asset management and rent recovery.